THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

Guests: Eliot Spitzer, Dustin McDaniel

RACHEL MADDOW, HOST: Can you tell how good you are yet?

CHRIS HAYES, "ALL IN" HOST: I can`t tell. You know how that is. You think about everything you did wrong as soon as you get off set is what you do.

MADDOW: Well, tonight, you did wrong is private because it`s spectacular, man. Congratulations.

HAYES: Too kind.

MADDOW: Keep going.

All right. Thanks to you at home as well for staying with us for the next hour.

There is a lot in motion right now in the news.

We`ve got updates for you this hour on the killing of that district attorney and that assistant district attorney in that one county in Texas. Two separate and apparently targeted killings less than 100 miles from where the apparent killer of the Colorado prisons chief was himself killed in a shootout with police. We`ve got a bunch of developments in that situation today including on the crucial issue of whether a white supremacist prison gang may be linked to these assassinations.

We`ve got election night results tonight from South Carolina. Those are coming, too, in just a second.

The Kansas clinic that was run by Dr. George Tiller before Dr. Tiller was murdered by an anti-abortion activist four years ago, that clinic today in Kansas made its formal announcement that it is reopening for the first time in four years.

In the guns debate, Connecticut moved forward today with the most ambitious and most unique package of gun reforms since the Newtown school massacre back in December. A vote is expected tomorrow in the Connecticut legislature. The governor says he will sign it.

While today, the NRA distinguished itself by having the stones to announce yet another plan for more guns in schools, while continuing to block everybody else`s votes to keep guns away from both schools and from madmen.

President Obama announcing a big new plan that some scientists are calling a moonshot, a big, ambitious scientific project of national significance that could change medicine, could frankly change the world if it works.

Are we the kind of country that does stuff like that anymore? Can we be that kind of country again?

Like I said, there`s lots in motion in today`s news, but we begin with scandal. Good old fashioned bribery, scandal -- complete with perp walks and politicians in handcuffs and envelopes of cash being passed at diners and in parked cars and secret wiretaps. Sometimes, politics is really just an episode of "The Sopranos." And today was one of those days.

What happened today, actually, in terms of understanding the players and what they did, the easiest place to start is the 2012 election in New York state. It`s kind of a weird one in New York state.

You know that the governor of New York state is a Democrat and a very popular one, Andrew Cuomo. He was not on the ballot in 2012. He had been elected two years earlier in 2010. Election night 2010, everything else in the country went Republican, but that New York governor`s race that put Andrew Cuomo office, that race was blue by 30 points.

And then in 2012, Andrew Cuomo`s not on the ballot. The only statewide races in New York were, of course, the presidential race, in which Obama beat his opponent by 27 points. That was one of the biggest margins of any state in the country. The other statewide race on November 2012 in New York state was the Senate seat held by Democrat Kirsten Gillibrand. Senator Gillibrand beat her challenger by a 45-point margin.

So, yes, the political picture in New York state was just overwhelmingly Democratic, just solidly blue in terms of the 2012 election. But New York is a big state, a largely rural state and a more idea logical state that it sometimes gets credit for, thanks to its statewide election results.

One of the manifestations of New York`s unheralded diversity is that even though the state is so blue it looked cold in any statewide vote, when it comes to voting for state legislators, it`s not nearly like that. The Senate in New York state, the Senate has only been in Democratic control three times since World War II.

But on election night November 2012, on that hugely blue night in November where President Obama beat Mitt Romney by a 27-point margin under the leadership of a Democratic government with the highest approval ratings of any governor in state in the country, on that hugely blue night in November, where Kirsten Gillibrand embarrassed her opponent, on that big blue night New York, it looked like even the impenetrable fortress of the permanently Republican-dominated Senate was going to come crumbling down and finally become blue as well. The Democrats looked like they won the Senate in November 2012 in New York. Democrats in November won 33 seats, Republicans won 30 seats.

So that means Democrats take over the Senate, right? Wrong. Even though the Democrats won a clear majority in the senate, a subgroup of Democrats decided to peel off and caucus themselves with the Republicans instead, so the Republicans could keep control in the Senate. It was really weird. It was very weird at the time.

When it happened, even before we found out what it was leading to today, it seemed like a weird thing.

"The New York Times" said when it all happened that it was a particular coup for the breakaway faction of Democrats when they recruited a Democrat to their side who is the former leader of the Senate Democrats.

Quote, "They also recruited an additional Democrat to their caucus, Malcolm A. Smith of Queens, a former leader of the Senate Democrats how has sought support from Republicans for a possible run for mayor of New York City. The breakaway faction of Democrats and Mr. Smith talked through the arrangement over a recent lunch of fried meat balls with peppers and onions at Enzo`s, in the Morris Park section of the Bronx."

Well, today, it was not fried meat balls with peppers and onions, but it was a shared arrangement between Senator Malcolm A. Smith and the Republicans who he thought could get him on the ballot as a Republican to run for New York City mayor.

See, there are a lot more Democrats than there are Republicans in New York City. So it is a tried and true method to become a Republican, specifically for the purpose of running for New York City mayor. It means you don`t have a difficult primary, right? You have an easier primary if you`re running as a Republican than if you were running on the Democratic side, even if you have been a lifelong Democrat.

That`s how Mike Bloomberg got the mayor`s job in the first place, right? Then once he was in -- he ran as a Republican, then once he was in, he dropped the Republican label and became an independent.

But if you are a registered Democrat and you want to pull this, you want to appear listed as a Republican on the ballot in a New York City election. What you need is a majority of Republican Party bigwigs in the city to sign off on you doing this. Yes, yes, we know you`re Democrat, but we`ll sign this waiver along you to run as a Republican, we know why you want to do it.

Well, when that Democratic state senator was arrested today, he was arrested alongside two other Democrats and three Republicans, with whom he was allegedly conspiring to bribe his way into getting that permission from New York City bigwigs so he could get on to the ballot so he could get a short cut to the mayor`s race, so he can maybe end up running America`s largest city.

It was the Democratic state senator turncoat who helped give the other party, the Republicans, control of the state Senate and it was the chairman of the Republican Party in the Bronx and the vice chairman of the Republican chairman in Queens and Republican city councilman.

Six arrests and all the accompanying salacious details from the U.S. attorney today who looked disgusted at what he had to explain to the public.

(BEGIN VIDEO CLIP)

PREET BHARARA, U.S. ATTORNEY: The complaint sets forth three bribery schemes involving cash payments of tens of thousands of dollars to elected officials and party leaders. Every New Yorker should be disheartened and dismayed by the sad state of affairs in this great state.

From time to time, the question arises, how common is corruption in New York?

I can tell you based on the cases we have brought and continue to bring, it seems downright pervasive. But don`t take my word for it. Consider the words of City Councilman Daniel Halloran caught on tape in this case. After allegedly receiving a $7,500 cash bribe, he says to the cooperating witness and you can see on the chart here again to my left, quote, "Money is what greases the wheels, good, bad or indifferent."

During the same meeting, Halloran allegedly says, quote, "That`s politics, that`s politics. It`s all about how much and that`s our politicians in New York. They`re all like that. All like that. And they get like that because of the drive that the money does for everything else. You can`t do anything without the money."

After the string of public corruption scandals we continue to expose, many may fear there is no vote that is not for sale, no office without a price and no official clean of corruption.

(END VIDEO CLIP)

MADDOW: Money is what greases is wheels, good, bad or indifferent. Quote from the Republican city councilman arrested today, along with five others.

Feel dirty yet? How about the allegation that the Republican city councilman thought his big payoff with dealing with all the bribery, that he would get named New York City`s deputy police commissioner. If the bribing worked out and his guy did succeed Mike Bloomberg as mayor, he`d get that big law enforcement job.

My favorite detail from the complaint is where the vice chairman of the Republican Party in Queens apparently decided that the stuff they were talking about was so shady, it was so illegal, that he ought to take precautions.

And so, he decided in one of these meetings they ought to pat down one of the guys he was talking with about the bribery details, to see if the guy was wearing a wire. The guy who he was patting down was wearing a wire. He was an undercover FBI agent and did have a recording device on him to record those conversations, but the Republican guy missed it. He did not do the pat-down well enough to find the wire and the FBI agent just kept recording.

What would have happened if he had found the wire?

So that`s part one of today`s news that leaves you feeling like you want to shower in bleach.

Part two involves this guy, Governor Ultrasound. We hardly knew you, Bob.

In a political context, Governor Bob McDonnell of Virginia is known for trying to portray a moderate Republican image while governing in Virginia, from deep right field. That`s how he got the nickname Governor Ultrasound.

Now, on his way out of office, he is pushing more antiabortion legislation and has just signed new strict voter ID restrictions for his state, which may or may not be blocked by the Voting Rights Act allows the Voting Rights Act to survive.

But thanks to new investigative reporting from "The Washington Post," we also know that Governor Ultrasound, on his way out office, he has found a whole new approach to making people feel dirty. The executive chef who Governor McDonnell hired to work at the governor`s mansion when he was elected, was recently indicted in the state of Virginia for embezzlement. The chef left the chef`s mansion amid a state police investigation that led to those embezzlement charges.

But once he left the job of being official governor chef at the mansion, he still ended up cooking for him and at the governor mansion. Specifically, the former chef`s catering company ended up doing the $15,000 dinner when Governor McDonnell hosted his daughter`s wedding at the governor`s mansion.

Now, hosting your daughter`s wedding at the governor`s mansion, that`s the sort of thing that gets a lot of positive press attention, right? You get earned media and the kind of attention you cultivate yourself with a big, public Facebook page full of photos with from the event.

But while the wedding was getting the attention, the governor`s spokesperson took pains to say that the family, the family, the governor`s family, was paying for all the expenses associated with that event.

Now, under questioning from "The Washington Post," the governor`s spokesman is changing the story, saying actually, the governor`s daughter herself paid for that $15,000 dinner. And by paying for it herself, what he means is that she, quote, "paid for it by accepting it as a gift from one of dad`s campaign contributors."

Since it was a gift though to the governor`s daughter and not to the governor himself, there was no need to report this gift.

The governor does admit to his campaign taking more than $28,000 in gifts from the same contributor in the form of private air travel. Plus, but another $80,000 in private air travel donated to the governor`s political action committee. Plus, more than $9,000 in personal gifts to the governor, more travel, food and lodging and entertainment, again, not including his daughter`s wedding.

The contributor in question is the head of a company that makes this non-FDA approved anti-inflammatory drug which is made from something related to tobacco. This picture that we have next here, yes, that is reported to be Bob McDonnell holding their product up to the camera to have his picture taken with it.

The governor spokesman said the governor never authorized the company to put this photo of the governor with their product on the company`s Facebook page, but the spokesman also says, yes, Governor McDonnell does enjoy taking the supplement.

The company`s launch party for its unapproved drug was also hosted by Governor McDonnell at the governor`s mansion, paid for the governor`s political action committee, same political action committee that accepted tens of thousands of dollars in gifts from that company. Pleasure doing business with you, sir.

Three days before the daughter`s wedding, the governor`s wife flew down to Florida to go to an investor`s conference for the company to tout the benefits of their tobacco-related wonder drug. The first lady of Virginia, three days before the wedding. Wow.

The company has now reportedly received subpoenas from the U.S. attorney`s office as pat of an investigation about to be related to transactions involving the company`s stock. I should also note that among the significant stockholders to the company is the Republican nominee to succeed Governor McDonnell, a man named Ken Cuccinelli, who himself is now in trouble for having gone nearly a year without disclosing that he had those shares in that company. It`s nice, right?

Perp walking, handcuff politicians in a bribery scandal in New York, the campaign contributors secretly paying for the daughter`s wedding at the governor`s mansion in Virginia, then blaming the daughter, saying it was her relationship with this guy that was under investigation now?

But, oh, wait, there`s more. Oh, wait, there`s more. In case your second bleached shower of the last 11 minutes isn`t enough, it`s time for a third, because it`s not just Governor Ultrasound and the astoundingly personal, mutual generosity of his family and his campaign contributor. It`s not just envelopes full of cash being passed between politicians and parked cars in New York City, no, there`s more just from today`s news.

Specifically, from today`s business pages, where we learned today that the outgoing chief of the Securities and Exchange Commission, the top cop, the top regulator on Wall Street, is leaving that top cop, top regulator job to go work for Wall Street.

Mary Schapiro having left her job as chair of the SEC has decided to land very, very gently with a job at something called Promontory Financial Group, a Wall Street outfit that helps banks maneuver around the kinds of regulation that she was in charge of enforcing until about five second ago.

Appointed to the job after the SEC did not catch Bernie Madoff, Mary Schapiro took over in the midst of the financial crisis. Her tenure was marked by no executives from companies that caused that crisis, getting perp-walked or handcuffed ever and now, upon leaving, she joins the industry herself -- soft landing.

She told "The Wall Street Journal" today that there should not be any, quote, "revolving door concerns" about what she`s doing here because, quote, "in my case, there is no revolving door. I won`t ever be going back to government." Right. Government served its purpose in the case, setting you up for this Wall Street job.

It should also be noted that the person replacing Mary Schapiro as the new top cop at the SEC is arriving there from the financial sector.

So, this is how it works, right? I`m in charge of enforcing the laws that keep you in check. Now, my job is to help you get around those. Now, my job is to enforce those laws. Now, my job is to help you evade those laws. That`s how it works, right?

Money is what greases the wheels -- good, bad or indifferent.

When Republican Scott Brown was in the United States Senate, his top campaign contributor was the financial sector, it was Wall Street. When he left the Senate, we learned subsequently that his new job is working at the lobbying firm that represents Goldman Sachs. Around the same time, we learned that former Democratic Senator Ben Nelson was going to work at a top lobbying firm for the insurance industry.

Who was Ben Nelson`s top contributor while he was in office in the Senate? Look at that. The insurance industry.

Every time someone in politics, someone in Washington does this, it bolsters the expectation of everybody else still in Washington or anybody planning on ever heading to Washington in their career, that if they use their time in office, if they use their time in politics to scratch some rich guy`s back or some rich industry`s back, there will be a nice, soft landing arranged for them when they get out.

It is every day corruption. It is the every day corruption that we are told we shouldn`t even think of as corruption.

What gets headlines is when it`s a bunch of guys scheming over fried meat balls in the Bronx, while somebody is wearing a wire, right? What gets headlines is when it`s something as humiliating as your wife flying down to endorse the guy`s product three days before you serve your 200 guests the fancy chicken dinner he bought you that you let everybody you paid for, for you daughter`s wedding even though he paid for it.

That`s when it gets headlines, right? That`s when it`s very obviously scummy. That`s when Bob McDonnell and all these New York politicians start to stink in the public`s estimation. That`s why people don`t want to go into public service, frankly.

But all of this is the same racket. All of this is. It`s all cashing in for yourself and for the people who can buy access to you while the public interest goes begging.

Arrests and perp walks and investigations stop the New York and Virginia versions of this racket. But what stops the big version? What stops the Washington version that they tell us isn`t corruption, it`s just a way of doing business? What stops that?

That`s next.

(COMMERCIAL BREAK)

MADDOW: Former New York governor, former New York attorney general, Eliot Spitzer, is here next. Stay with us.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP)

BHARARA: Many may understandably resign themselves to the sad truth that perhaps the most powerful special interest in politics is self-interest. As I said once before, every time a politician is arrested in New York, it should not feel like a scene from Groundhog Day and yet, it does. What can we expect when transgressions seem to be tolerated and nothing seems ever to change? New Yorkers should demand more.

(END VIDEO CLIP)

MADDOW: U.S. Attorney Preet Bharara today announcing federal corruption charges against six public officials in New York, including charges that a Democratic state senator was trying to bribe his way on to the Republican line of the ballot for the New York City mayoral race this year.

Joining us now for the interview is former New York governor and New York attorney general, the man who earned himself the nickname "sheriff of Wall Street" while he was in office, Eliot Spitzer.

Governor, it`s good to see here. Thank you.

ELIOT SPITZER (D), FORMER NEW YORK GOVERNOR: Thank you for inviting me.

MADDOW: So, I want to talk to you about the broader connection between different types of corruption here. But this big potential election rigging scandal that unfolded today, is the silver lining here is that it was nice and bipartisan at least?

SPITZER: You know, it was so incredibly stupid. I mean, Malcolm Smith has put himself into that rare category of corruption, stupid, venal. It made no sense. But, unfortunately, those who in Albany, seen Albany, not terribly surprised.

MADDOW: Yes.

SPITZER: It`s a sad, sad day at every level.

MADDOW: But -- U.S. attorney is talking about that, saying, listen, it shouldn`t feel like Groundhog Day every time a politician is arrested. I mean, I feel like there`s a nexus of sort of petty corruption that`s expected petty corruption and outright bribery that`s almost expected among public officials in both parties in both of these states.

SPITZER: You are right and that`s why listening to you introduced this segment before about the connection between the petty and obviously corrupt case that Preet announced today, a good case, a powerful case, one that needs to be brought. And yet, you were saying, the deeper corruption, a Mary Schapiro going from the SEC, right to the regulative company, and saying, oh, you don`t need to worry, I`m not going back to government -- she misses the entire point.

The entire time she`s been in government, she was being wooed by these companies and she reacted to that. I won`t challenge her motives individually. But people know you want to job. You don`t bring the big case.

And so, that invidious relationship that has done so much in such a corrosive way to damage enforcement of a law at that level needs to be focused upon as you just did, as much we do the case against Malcolm Smith.

MADDOW: But we see that, the SEC with Mary Schapiro leaving, I love that she thinks that the door -- because the door stopped revolving --

SPITZER: Right, exactly.

MADDOW: -- once she got out, it doesn`t come back in. But it is also not just in regulatory jobs like that. I think you also see it when senators leave office, when members of Congress leave office, when they go work for their biggest campaign contributor, or whoever was paying them the most attention on their oversight committees. I mean, what is the cure to it?

SPITZER: Look, you know, I have -- we discussed Mary Jo White a couple of months ago.

MADDOW: Incoming chair.

SPITZER: Right, incoming chair of the SEC, and I said, look, let`s be agnostic because revolving doors are better metaphor that diagnoses, sometimes, people can go back and forth and not be prey to the intellectual destruction that comes.

I`ll give you an example, Gary Gensler went from Goldman to CFTC, did a spectacular job. And then there`s the example of Tim Geithner, who was never in the private sector, who did a horrific job.

And so, it isn`t as easy as you`ve been in the private sector, you got to go to government, therefore, you will be bad. What really is determinative is the intellectual integrity of the person on the job.

Now, having said all that, what can be done, buffers? There should be a five-year mandatory hiatus. You are in government, in a regulated sector, you cannot work for them for five years. You know, we need to rebuild the perception of integrity of government, and it will not happen if Mary Schapiro goes on Monday or Friday from the SEC. Monday, she`s working for a financial services company. You simply can`t have the public trust and for good reason.

MADDOW: Well, we do have laws about lobbying. We have laws that restrict lobbying, and she`s being clear to note I`m not going to lobby for these companies. I`m banned from that, but she`s going to be steering those companies and how to get around to the regulatory structure she helped build.

SPITZER: Precisely. It simply can`t be that you go back and forth that quickly, and the public will believe that honest decisions are being made. Members of congress, who on Friday are in Congress, Monday, lobbying in it firm, even if they`re not individually lobbying, the firm is, they`re getting revenues, they`re benefiting from their capacity to sit down with clients and do all the other things.

Lanny Breuer classic example, Lanny Breuer had been a major law firm. He then went to the criminal division. I think everybody -- not everybody, his mom would not agree. I will tell you, I thought his tenure at justice, a disaster. The wrong the cases, they lost the wrong cases, didn`t bring the right cases. Now, he`s back at the big firm doing the same sorts of representations.

It simply shouldn`t be that people go back and forth that quickly because the public looks at and says, no wonder everything is corrupt.

MADDOW: There is a specific cop mentality that should come with being a regulator, which is what we`re talking about here. But there is also the bigger issue, which is just not about regulators -- which is about whether or not it is companies that simply wait out various governments and various government officials in order to get their way and they buy everybody along the way.

Is there something structurally that can be done to try to interrupt that process?

SPITZER: Well, look, the deal of mind in the criminal in the criminal system is an adjournment is as good as an acquittal, just doesn`t last as long. In other words, companies know if they wait, their patience is greater than that of the government official who`s brought the case, who`s invested emotionally, they`ll leave. Somebody else will look at the file and say, ah, not my case, who cares?

A couple of things could be done. I think Mary Jo and this isn`t directly responsive. I think Mary Jo should say, no more, neither admit nor deny. It`s one of the most corrosive pieces of our failure to regulate the financial services community.

Time and time again, major companies settle, they pay some money, but neither admit or deny that they did anything wrong. It proves this is merely a financial transaction.

Any sense that justice is being meted out is eviscerated. Here`s a check, but we`re just doing it to save the litigation costs, we`re not admitting we did anything wrong. And I think we need to get rid of this and we need to get the CEO to stand up and say something wrong happened.

I think CEOs should be fired, even if they`re not individually culpable, if they have overseen a company where there are a multitude of instances of wrongdoing, second time, third time, three strikes you`re out, the CEO clearly has not been managing properly. You know, this has to be thought out in terms of the size of the company a little bit. CEOs should be fired.

None of that happened under Mary Schapiro. That`s why her tenure at the SEC, a disaster. Nothing was done.

MADDOW: But she`s going to have a very comfortable landing.

SPITZER: She will be comfortable. As you say, soft landing.

MADDOW: I feel like, in broader American politics right now, if you look, if you`re trying to understand the enthusiasm for people like Elizabeth Warren, was has taken such a hard angle on Wall Street, Ed Markey has taken a hard angle on the oil industry is going to run for another Senate seat in Massachusetts.

SPITZER: Right.

MADDOW: This is why. There`s a hunger for an emerging, progressive attitude towards these things that is much sharper elbow than we`ve been getting.

SPITZER: Simplicity and clarity of purpose, and a statement that right is right, wrong is wrong --

MADDOW: And the public interest is invaluable.

SPITZER: Yes. That`s right.

MADDOW: Eliot Spitzer, former New York governor, former New York attorney general -- thank you for being here. Good to see you.

SPITZER: It`s my pleasure. Thank you.

MADDOW: All right. We`ve got more to report tonight on the super goofy, filthy, Arkansas oil spill, on the special election in South Carolina, and on that insane situation in Texas involving the murder of the assistant district attorney and attorney.

Lots ahead. Stay with us.

(COMMERCIAL BREAK)

MADDOW: It`s Election Day. Yeehey!

Now, as you may remember is Jim DeMint. He was a Republican senator from South Carolina, but then he quit.

This is Nikki Hailey, South Carolina`s Republican governor. When Jim DeMint quit, she got to pick a replacement. She picked a first term Republican Tea Party congressman named Tim Scott to go take Jim DeMint`s Senate seat. That freed up the seat in the House that Tim Scott had been occupying.

And so, now, it`s Election Day because today, South Carolina Republicans got to pick who they want to run for that Tim Scott seat in Congress.

Heading into tonight`s run off, former Republican Governor Mark Sanford was the favorite. He`s trying to mount a political comeback after his disgraced by lying publicly about an affair that he was having in Argentina while he told everybody in the state that he was actually just hiking the Appalachian Trail.

Governor Sanford was facing former Charleston County councilman Curtis Bostic.

But the results are now in, and Mark Sanford is the winner of the runoff and that means he will face Elizabeth Colbert-Busch, Stephen Colbert`s sister, in the general election for South Carolina`s vacant congressional seat. That general election will happen on May 7th, which means we won`t have election music for weeks now. You have to savor this timpani while you can.

(COMMERCIAL BREAK

(COMERCIAL BREAK)

MADDOW: OK, it`s July 25th, 2010, an otherwise normal summer night in the city of Marshall, Michigan. And then out of nowhere, boom, an oil pipeline bursts, sending hundreds of thousands of gallons of crude oil everywhere, including into the nearby Kalamazoo River.

The oil company that owns the pipeline, a Canadian company called Enbridge, does nothing for close to 18 hours. And the oil keeps spewing all that time. The oil spill forces evacuations of all the local residents. It compromises the drinking water in the area and now, nearly three years later, the oil company responsible for the spill is still trying to clean up all the oil.

Almost three years after that pipeline burst, there is still oil in the Kalamazoo River. That was July 2010.

One year later, it`s July 1st, 2011. It`s nearing midnight in the city of Laurel, Montana. It is an otherwise normal summer night in Montana, then again, boom, another oil pipeline. This one owned by ExxonMobil. It bursts out of nowhere and dumps oil into the previously pristine Yellowstone River.

Even though local officials warned Exxon that there was dangerous flooding happening in the area, and even though another oil company shut down their pipeline in the area because of that warning, Exxon decided to keep theirs running. And this was the result, July, 2011.

Now, today, Mayflower, Arkansas, city in central Arkansas, just outside Little Rock. It`s Friday afternoon, this past Friday, and well, by now, you know the drill. It starts with boom.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: So, that is a pipeline that has busted and has flooded the neighborhood and is going all the way to the drain at the end of the street. Luckily, our house is here, which is seemingly unaffected, but the smell is unbelievable. I mean, look. Incredible. And that is oil.

(END VIDEO CLIP)

MADDOW: That is oil -- lots and lots of oil.

On Friday afternoon, another pipeline, again an ExxonMobil pipeline, this one carrying between Illinois and Texas, ruptured underground here in Mayflower, Arkansas. The rupture sent a thick stream of crude oil everywhere.

Dozens of residents have been evacuated indefinitely. We`re told the oil is now encroaching toward Lake Conway, which is a local source of drinking water.

So far, the oil company says 12,000 barrels of oil contaminated water have been recovered by emergency responders.

One of the things that has emerged since this spill in Arkansas is that it turns out this oil pipeline, which is now we know, essentially, a ticking time bomb lurking underground, this pipeline was mostly unknown to the residents who live right on top of it. Watch.

(BEGIN VIDEO CLIP)

REPORTER: Mike Oswald (ph) is worried about his mother.

UNIDENTIFIED MALE: No, I didn`t know there was one.

REPORTER: Oswald is like many Arkansans who said they had no idea the pipeline existed.

Mayflower resident Christian Alexander feels residents should have been warned. Alexander says he knew nothing about the pipeline.

UNIDENTIFIED MALE: Before we buy the house, you know, what is underground or what is, where the houses are.

UNIDENTIFIED MALE: Supposed to be a 20-inch pipeline runs from Illinois to Texas.

REPORTER: Brantley (ph) knew nothing of the pipeline.

UNIDENTIFIED MALE: I had no idea and I`m the fourth of fifth house from it.

REPORTER: Official from the Arkansas Geological Commission say most of the pipeline is buried underground expect for places where it crosses a body of water. They say, though, there are published maps of the pipeline. After 9/11, details of this location were somewhat depressed.

(END VIDEO CLIP)

MADDOW: So, residents don`t even know until Friday when they learned about it because it bursts.

Well, all of that is going on in Arkansas, the other big thing going on in the oil industry, it`s happening simultaneously to this spill in Arkansas is that in nearby Louisiana, there`s a trial. BP, Halliburton and Transocean are in court defending themselves at trial that never happens against charges related to the Deepwater Horizon disaster, which, of course, is the largest accidental oil spill in history.

As prosecutors have been building that case against those oil companies, what has emerged in the trial is a pattern of companies destroying evidence related to the spill. A former BP engineer has been charged with destroying electronic messages about the spill. BP for its part is now turning around and accusing Halliburton of destroying documents in order to hide their role in what went wrong in the spill. Destroying evidence is a way of slinking out of responsibility.

It is against that pattern from the other nearby oil company disaster that officials in the state of Arkansas are now gearing up to take on ExxonMobil. So while they are dealing with this spill physically in Arkansas, while they`re trying to clean up what`s been spilled and trying to prevent things from getting any worse, trying to protect the drinking water -- while they are doing that, the attorney general from the state of Arkansas has put Exxon on notice, very publicly. The attorney general demanding Exxon preserve all documents and information related to Friday`s oil spill in his state.

He says his expectation is that ExxonMobil will come ply with that question, but that assertion is cognizant with the fact that other oil companies in the very recent past with even bigger spills have not done that.

Joining us now is the Arkansas attorney general, Dustin McDaniel.

Mr. Attorney General, thank you so much for being with us tonight. I really appreciate it.

MADDOW: Your office has asked Exxon to preserve documents related to this accident. We know that in the gulf spill, BP and Halliburton are accusing each over of destroying documents related to the spill. And on the Yellowstone spill, documents show that it took twice as long to seal up that leaking pipeline as Exxon first said it did.

Knowing all of that, are you confident you`re going to get the cooperation you need from Exxon in this situation?

MCDANIEL: Well, I certainly hope so, but most importantly, I`m going to let them know on the front end that we expect it and we intend to watch closely how they respond. I`ve been in close contact with my friends, the attorneys general of Louisiana and Mississippi as they have been preparing for the Deepwater Horizon litigation that you`ve been talking about and they`ve given me some serious points of concern and caution leading up to that litigation.

So I`m trying to learn from some of their lesson so that the people of Arkansas don`t have to relive some of those issues.

MADDOW: Part of what I want to ask you about, I`m just thinking -- I guess I`ve been thinking about sort of regulatory capture and how good the government is at fighting industries that obviously are experts in their own fields when these fights need to happen. Obviously, oil companies deal with litigation over spills all the time. They`re the companies that cause them, but you have to deal with everything. And you say there`s no reason for you to be expert on this particular -- this particular type of litigation or these particular types of companies.

What kinds of advice are you getting? What things are you learning about how to deal with these companies and their infinite resources and all their experience in this?

MCDANIEL: Well, you`re absolutely right. I`m no expert in this kind of litigation, but what I have spent my time as attorney general doing is standing up for the people of Arkansas against out of state, multinational companies that have limitless resources that have found ways to take advantage of the people of Arkansas.

And we`ve been very successful in standing up for ourselves. We`re a small state, but we are a strong, especially when we are looking out for one another.

So I want to know how long was that rupture releasing oil into the ground before it finally saturated the ground so much before it came up above the surface. I want to know what the chemicals are in the mixture of this Wabbaseka crude that is also been released into our environment. I want to know what they`ve done to cap it. I want to know the history of the inspections of the pipeline. I want to know who`s going to secure the pipeline.

And as you said, it is a serious learning curve. For instance, I had no idea that the Department of Transportation regulates America`s oil pipelines. The DOT is in charge of this investigation, not the EPA, certainly not the state, Department of Environmental Quality, so we`re having to figure out whole new regulatory alphabet soup.

And the attorney general`s office in Arkansas, as I said, tends to be ahead of that curve and not behind it.

MADDOW: One of the things people have focused on in terms of national attention to the spill in your state is the type of oil. And as you say, there`s big learning curve for all of the technical aspects of this. But there are these reports this is tar sands oil, that it`s a lower grade oil than you might expect from another, I guess, more typical spill.

Does that turn out to matter at all to your investigation in terms of how you`re pursuing this?

MCDANIEL: It may or may not matter to the nature of the investigation. It certainly is going to matter with the nature of the clean-up. This product wasn`t even considered to be oil, per se, until recently. And only recently as technology reached the point to where it`s cost effective to break down the sands and add solvents and transport this substance to be refined and it`s particularly pungent. It`s particularly hard to clean up. It`s very viscous.

So I would think that the expense is going to increase and that the length of time for the clean-up as you mentioned, the Michigan spill, so we`re obviously very concerned about that. Will that impact the nature of the investigation? No. We`re going to be aggressive in asking for information as soon as tomorrow from Exxon.

And to their credit, I must say, so far, they`ve been cooperative.

But I think we are just the beginning of a long process.

MADDOW: Arkansas Attorney General Dustin McDaniel -- thank you so much for your time tonight and you`ve helped me understand a lot of stuff about this that I did not understand before in terms of how you move forward. Good luck. Stay in touch with us on this, sir.

MCDANIEL: Thank you.

MADDOW: Thank you.

All right. Here`s a money question: how much does it cost to not think big? That`s straight ahead.

(COMMERCIAL BREAK)

MADDOW: There appears to be significant news regarding the murder of Kaufman County Texas district attorney Mike McLelland and his wife. Since the McLellands killings were discovered Saturday, speculation about who committed the crime, who killed them, is centered on a possible connection to the Aryan Brotherhood of Texas, which is a white supremacist prison gang who`s activities have been prosecuted by Kaufman County D.A.`s office.

Two months ago, it was Mike McLelland`s deputy, the assistant D.A., Mark Hasse, in the same county, who was shot and killed in a parking lot outside the Kaufman County courthouse. He was killed at a time when sources say he was, quote, "heavily involved in investigating the Aryan Brotherhood of Texas."

Mike McLelland who was Mark Hasse`s boss, who was the man responsible for finding Mark Hasse`s killers, D.A. Mike McLelland talked to the "Associated Press" after his deputy`s killing about the possibility that the Aryan Brotherhood of Texas might have been responsible for the Hasse murder.

So speculation about this particular prison gang maybe having connection to these two murdered Texas prosecutors, that speculation has been based on both widely known circumstances of the activities of that office and also on the words of the Kaufman County D.A. himself, prior to his own murder.

However -- and it is a huge however today -- that speculation about the prison gang has been starkly interrupted today by new reporting about the murders which suggests an entirely different possibility. It is "The Los Angeles Times" reporting tonight that someone in an entirely different case is also, quote, "emerging as a person of interest." This is according to a law enforcement source.

That person is reportedly a local official who lost his job in a corruption scandal and who made numerous threats thereafter, including threats of retaliation against the two prosecutors who have now been killed in Kaufman County.

Mark Hasse and Mike McLelland are just the 12th and 13th prosecutors in this country murdered in the last 50 years. This sort of crime is very rare in our country. And tonight, it remains unclear who is responsible in Kaufman County, Texas.

We will report developments as law enforcement tries to solve this mystery. Watch this space.

(COMMERCIAL BREAK)

MADDOW: You could argue it started with President George H.W. Bush, Poppy Bush, who was not exactly Mr. Science, but who nevertheless signed the first check as president for the Human Genome Project. The idea was to map our DNA, map all the chromosomes, the very basic biological stuff that makes us human.

The project was first shepherded by the Department of Energy. They called it the National Laboratory Gene Library Project. That later became the more universal Human Genome Project.

Funded by the U.S. government, this thing became one of the most important intellectual endeavors of our time. This was a nonpartisan thing. A decade later, President Clinton announced a major breakthrough. They had finished the first rough draft of the human genome.

Because we the public funded the project, the data it produced is free and available to anyone who wants it, property of everyone. You can get a free poster for your dorm door if you want, or you can use it to research new treatments for cancer or sickle cell anemia.

As a country, we set out to map the human genome and we map human genome. And with all of that publicly funded publicly available data, we set the table for future scientific progress.

They say it produced $140 in economic results for every dollar that we invested in that project.

Well, today, President Obama announced a new project, the Brain Initiative. Scientists will be mapping the stuff between your ears so we can finally understand how the individual cells and regions of our brains work and how they work together. The idea again is to think big, to use the new tools we have for looking at the human brain and to make even better tools to create a new and better map of the human brain and its functions.

Then, we make that map publicly available so scientists in all fields can use it to work on, say, Alzheimer`s, or autism, or schizophrenia. Right now, the map of the human brain is filled with blank spots the size of Texas. We know that this man`s Parkinson`s disease makes it really hard for him to walk. But when that same man with Parkinson`s can ride a bicycle like he`s a 10-year-old with no problems at all, that we don`t understand. That`s a mystery.

If we understood the brain better, we could offer more help to people with brain injury, like so many veterans coming home from our wars with signature injuries from the wars. If we understood the brain better, maybe we could offer replacement limbs that just work.

Like the first President Bush 20 years ago, what President Obama is calling for is for the nation to think big. We can do that if we want to. We have done it in the past.

Or we can think small. This photograph was taken a couple weeks ago in Columbus, Indiana. Because of budget cuts imposed by Congress, Head Start programs around the country are having to kick preschoolers out of class. The "A.P." caption to this photo says the man is listening to the names of families that have just lost their place in preschool in his town. They decided which kids got to stay in Head Start by lottery. They drew the names out of a fish bowl in Columbus, Indiana, and Franklin, Indiana.

Thirty-six kids got booted from Head Start in those towns, because their names were not picked and because Congress decided to impose arbitrary life changing nickel and dime budget cuts that are technically called the sequester. But for those kids in Indiana are just called no more preschool for you.

Despite real world harm from those cuts, Republicans in Washington have seen the sequester as a political victory, because even though they didn`t particularly want the sequester, Democrats really didn`t want it, and anything Democrats don`t want must be a good thing. Of course, generally speaking take a buzz saw to the federal budget fits the Republicans larger ideological stance, which is that government must always do less if it wants to do better. Government doing less is better at face value.

So, in that ideology, Republicans coming up with a way to cut Head Start is more important than, say, Head Start itself. But this is the two levels at which this big decision is operating. Do we believe less government is always better? Do we dislike government doing anything?

If so, austerity. If not, can we both protect the things we do now, like letting kids in Franklin, Indiana go to preschool, and think big, ambitious, think mapping the human brain. Can we still do big things?

Now it`s time for "THE LAST WORD WITH LAWRENCE O`DONNELL."

Have a great night.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.END

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